Myanmar Seeks to Restore Status Among Top Rice Exporters

Rice from Myanmar is about $10-$20 per ton cheaper than the comparable quality from Vietnam, India and Pakistan, said Jac Luyendijk, chief executive officer at SAT Swiss Agri Trading AG, which handles about $300 million worth of rice a year. Source: AFP via Getty Images

Oct. 29 (Bloomberg) -- Myanmar, the world’s top rice
shipper before five decades of military dictatorship made it
Southeast Asia’s poorest nation, plans to double exports over
five years, threatening to aggravate a global glut.

Overseas sales may climb to as much as 3 million metric
tons by 2017 from 1.5 million tons in the year ending March 2013
as yields and infrastructure improve, Ye Min Aung, secretary-general of the Myanmar Rice Federation, said on Oct. 25. The
U.S. Department of Agriculture raised its export forecast for
Myanmar by 25 percent to 750,000 tons for this year on Oct. 11.

The country that could be Asia’s next economic frontier,
according to the International Monetary Fund, is reviving the
rice trade as it reengages with the global economy and shifts
back toward democracy. The 2017 target would be equivalent to 8
percent of world exports this year, which are forecast by the
USDA at 37.7 million tons. The global market in rice, a staple
for half the world, has been in a surplus for seven years.

“The international rice market is very crowded with new
exporters like Brazil, Russia and Egypt,” Concepcion Calpe, a
senior economist at the United Nations’ Food & Agriculture
Organization, said from Rome. “Unless there is a disaster of
some sort, we still see the world rice economy facing an ample
supply situation in 2012 and 2013.”

The country plans to more than double yields to as much as
4 tons per acre in five years from about 1.25 tons to 1.5 tons
currently, said Ye Min Aung of the federation, which accounts
for more than 80 percent of the nation’s output. “We are
looking to boost productivity as well as income for farmers.”

Biggest Shipper

Myanmar was the world’s biggest exporter from 1960 to 1963,
with shipments of 1.6 million to 1.7 million tons a year, until
it was displaced by neighbor Thailand, according to USDA data.
Last year, it shipped 778,000 tons, ranking ninth after Uruguay,
and exports reached a nadir of 15,000 tons in 1996-1997. This
year, global rice output will exceed demand by 9.7 million tons,
up from 5.6 million tons the previous year, USDA data show.

It may take 10 years to 15 years for Myanmar to become a
top shipper again, shorter than the two decades Vietnam took to
become a top-three exporter, said Robert Zeigler, secretary-general of the International Rice Research Institute in the
Philippines. “We see Myanmar as an extremely important source
for rice production - there’s no question about it,” he said.

Myanmar’s strengths are low production costs, vast land and
abundant water and labor, according to the Asian Development
Bank, which says the country needs to increase farm output to
spur per-capita gross domestic product almost fourfold by 2030.
At present, agriculture accounts for 36 percent of an economy
that expanded 5.5 percent last year, and employs most of the
country’s 64 million people.

Cheaper Supplies

“The country has yet to have a proper legal, regulatory
and institutional setup,” said Cyn-Young Park, assistant chief
economist at the ADB. “So the talks on investments, though a
lot has been said, haven’t actually been materialized.”

Rice from Myanmar is about $10-$20 per ton cheaper than the
comparable quality from Vietnam, India and Pakistan, said Jac
Luyendijk, chief executive officer at SAT Swiss Agri Trading AG,
which handles about $300 million worth of rice a year.
Constraints include antiquated ports, which may not be able to
handle a sudden gain in volume especially during the rainy
season, he said.

The Port of Yangon handles about 90 percent of the nation’s
trade, according to the Ministry of Transport. Japan wants to
build a port and industrial estate at Thilawa, 25 kilometers (16
miles) south of Yangon. Italian-Thai Development Pcl, Thailand’s
biggest contractor, is also trying to get Japan to finance an
$8.6 billion deep-sea port and industrial zone in Dawei.

Rice Rally

Other nations are boosting their rice sales to tap the
market where prices have more than tripled in the past decade.
Rough-rice trades at $15.08 per 100 pounds ($332 a metric ton)
in Chicago now, up from $3.91 at end-2001. Brazil exported 1.3
million tons last year, tripling from the year before, and will
sell 1.1 million this year, according to the USDA.

Larger supplies from Myanmar won’t necessarily hurt
international prices, said Calpe from the Rome-based FAO. “Rice
is a dynamic market subject to many interventions by
governments,” including Thailand, she said.

Thailand’s exports may fall 39 percent to 6.5 million tons
this year from 10.6 million tons in 2011, according to the USDA,
as Prime Minister Yingluck Shinawatra has pledged to guarantee
minimum prices for farmers, boosting stockpiles to the highest
ever. That means Thailand would slip behind India and Vietnam.

Hybrid Seeds

The Myanmar government will soon allow seed imports and
introduce hybrid seeds to increase harvests, according to Maung
Aung, an agriculture policy adviser at the Ministry of Commerce.

“Agricultural development is the first priority for the
government,” he said by phone from Naypyidaw, the capital.
“Since production of agricultural products such as rice is low,
the government is pushing to increase both quality and quantity
in the agricultural sector.”

China’s increasing demand for the grain may help mop up
rising supplies from Myanmar, as imports soared to 1.9 million
tons this year from 575,000 tons in 2011, vying with Iran as the
largest buyer of the grain after Nigeria, the USDA says.

“China may become the largest importer by 2015,” said Myo
Thuya Aye, a senior central executive member of the rice
federation whose family has been trading rice since 1952.

President Thein Sein, who took power last year in elections
that ended about five decades of military rule, targets annual
GDP growth of 7.7 percent over the next five years. His
government plans to expand credit, increase fertilizer use and
promote higher-yielding rice strains to boost farmers’ incomes
and cut the poverty rate to 16 percent by 2015 from 26 percent.

‘Economic Frontier’

At present, Myanmar has the smallest GDP on a per-capita
basis in the Association of Southeast Asian Nations, UN data
show. Still, the country “could become the next economic
frontier in Asia” if it takes advantage of rich natural
resources, young labor force and proximity to China and India,
IMF mission head Meral Karasulu said in January.

Myanmar’s renewable water resources are among the highest
in Asia at 24,352 cubic meters per inhabitant per year, the ADB
said in August. It currently uses about 5 percent of its water
resources, giving it “substantial” potential for increased
irrigation, hydropower and livestock production, the ADB said.

“Myanmar has a great potential no doubt,” ADB’s Park
said. “But it’s a country in transition, so that’s the
caveat.”